Appeals Court Overturns Generic-Brand Name Settlement

Published Online: Thursday, August 30, 2012

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Appeals Court Overturns Generic-Brand Name Settlement

A Third Circuit US Court of Appeals has revived a class-action antitrust lawsuit that pits retail pharmacists and drug companies against Merck & Co Inc and generic drug maker Upsher-Smith Laboratories, according to an article published July 16, 2012, in The Wall Street Journal.

The lawsuit challenges a 15-yearold, $60 million agreement between Merck’s Schering unit—then Schering- Plough—and Upsher-Smith that delays the release of a generic version of potassium supplement K-Dur 20. The plaintiffs allege that they’ve paid too much for the drug because of the delay in releasing a generic competitor to the supplement.

The appeals ruling overturned an initial ruling that favored the Schering and Upsher-Smith agreement. According to The Wall Street Journal, the Federal Trade Commission and Justice Department filed briefs supporting the plaintiffs. In addition, the appeals court stated that judges should not be so quick to uphold the pharmaceutical settlements.

The ruling echoes a sentiment US antitrust regulators have held for some time—that pharmaceutical patent settlements are anticompetitive and harmful to consumers, and delay the release of generic drugs, according to The Wall Street Journal.

Meanwhile, the Generic Pharmaceutical Association (GPhA) maintains that the settlements are a vital tool for providing early access to generic medications. According to the organization, 17 of 22 first-time generics launched in 2011 were the result of patent settlements, including generic versions of Zyprexa (olanzapine), Solodyne (minocycline), Levaquin (levofloxacin), and Lipitor (atorvastatin).

“GPhA believes the Court’s decision is inconsistent with previous federal court rulings, which have time and again found patent settlements to be a lawful and valuable tool for bringing affordable medicines to market sooner than otherwise would be possible,” Ralph G. Neas, president and CEO of GPhA, said in a press release. “Proconsumer patent settlements have never prevented competition beyond a patent’s expiration. Indeed, they have resulted in making lower-cost generics available months and even years before patents have expired, saving consumers billions of dollars.”

The GPhA cited an independent study by RBC Capital Markets that found generic companies were able to market a product prior to brand name patent expiration in 48% of litigated cases. When factoring in settlements with brand name companies, however, the number rises to 76%, according to GPhA.

“The record is clear—settlements allow generic drugs to come to market long before patents on the counterpart brands expire, resulting in billions of dollars in annual savings,” Neas said. “Any effort to prohibit settlements threatens these savings and would have a detrimental impact on American consumers’ access to safe and effective generic medicines.”

Fast Facts: Generic Drug Trends

Of the drugs that were most often prescribed in 2011, 13 of the top 20 were generic medications.

More than 129 million prescriptions were written for generic hydrocodone/acetaminophen in 2011.

Generic medications account for 80% of total prescriptions dispensed.

Since 2007, the amount of health care dollars saved due to patent expiries is $65.2 billion.